Your business is growing very rapidly and your auditor is asking to capitalize labor costs for R&D and IT …
Experienced project managers understand that managing project risk is an inevitable and vital part of their job, and that even the most straightforward projects can overrun if they aren’t careful. Still, if you don’t accurately and methodically track your projects’ progress, are unable to communicate real-time scope creep to clients, and lack historical information on which to base project estimates, then you’re probably taking on more risk than you think.
In their 2015 Chaos Report, the Standish Group assessed more than 50,000 projects, and found that less than 29 percent of them were successful (i.e. on-time, on-budget and completed as planned). Even more disturbing is their finding that as many as 19 percent of all projects fail outright. While multiple factors contribute to these statistics, arguably the most overarching, universally-significant variable is visibility (or lack thereof) into your projects. This may seem like just another industry term that doesn’t actually mean much in practice, but in reality visibility is critical to the success of your projects — and consequently, your business’s bottom line.
Below we list two major challenges that stem from lacking visibility, and how to remedy them:
Strained client relationships
Many of us are familiar with the experience of dealing with a disgruntled client. General best practices call for clearly delineating client expectations at the onset of a project — but how do you cope with project setbacks, overruns, or clients changing their expectations? Projects rarely go according to plan, and if clients aren’t given ample notice of changes, then you’re likely to strain both their trust and their patience.
69 percent of professional services firms list “managing client expectations” as one the most prevalent and challenging issues they face — which isn’t surprising. In an industry increasingly leaning toward fixed-bid projects, things like scope creep and inaccurate initial estimates can make a substantial impact on your firm’s financial bottom line (and not in a good way).
When a client changes priorities mid-project, it typically increases the project’s scope by adding costs and extending timelines, and it can be difficult to gauge the feasibility and impact of these changes. Will you have to take a resource from a different project, and can you? Will a delayed timeline keep someone from starting a new project? Can you adjust to the desired changes without surpassing your client’s price threshold? Variations in client priorities and expectations are practically a given, so you need to be prepared to address these situations as they crop up, and — ideally — learn to anticipate them.
Fix 1: Real-time visibility
If a project diverges from its initial estimate, it’s better to warn clients of delays or cost overruns well before they happen. Still, it’s easy to miss the warning signs if you can’t track the status of projects in real-time. This is where real-time visibility comes in.
Too often are managers surprised by project scope creep towards the end of the project. If you have 30 percent of the project deliverables left, but only 10 percent remaining of project budget and resources, then this “epiphany” moment should come well before it’s too late for any meaningful action. In enabling project visibility by tracking progress in real-time, your team can ensure that potential fires are addressed in real-time as well. You want to be able to make quick comparisons between actual data and estimates to know as soon possible when you stray from projected costs or timelines — and to do so you must aggregate both real-time and historical data (more on historical data later).
Fix 2: Granular visibility
Real-time visibility plays a critical role in keeping your team and your clients abreast of potential problems — but how thorough is the data you’re collating? If you can’t see the details behind how time was spent, then chances are the little real-time visibility you have won’t be that useful to you. A vague, catch-all description for how time is being spent (example: “planning”) isn’t good enough — you need a to be able to capture granular information that ties back to specific resources, tasks, activities, and costs for each. You want to be able to pick apart the data in a variety of different ways to capture the most relevant insights, and it’s difficult to do so without access to specific decisions made, resources implemented, and time spent every step of the way. This can make the difference between spotting actual patterns and trends in your business operations, or only spotting obvious outliers.
At the end of the day, you can’t just look at profitability at the consolidated level — you need to drill down to a resource, project, and practice level to find out where things went wrong in a specific project, and how to anticipate similar issues in the future.
Project estimate and forecasting inaccuracy
Project planning is a game of estimates — budgets, timelines, resource distribution, and more — and too often do project managers rely on guesswork instead of data to determine these figures. This problem is only exacerbated by the increasing popularity of fixed-bid projects, which, of course, allow much less room for error when it comes to project cost and timeline estimates.
Plus, the boom and bust cycles so typical of the professional services industry add an additional variable to project planning — a sudden influx of projects can stretch your resources thin, and potentially push back deadlines.
Fix 1: Historical visibility
A data-driven approach to project planning is unparalleled when it comes to managing projects, especially those of the fixed-rate variety. Are your project costs typically underestimated? Do you historically need more resources than initially anticipated for a particular client? This kind of consolidated information can enable your shift from responding to challenges and setbacks as they arise, to anticipating them before they occur. Having access to historical data allows you to understand how your firm and your employees truly function for specific projects, and make informed estimates based on this data.
Historical data can also help you anticipate boom and bust cycles. If your accounting firm typically finds itself stretched thin in the spring, then you can draw on this historical data and hire additional resources during your perceived boom period.